Big Six Canadian bank earnings are about to drop, and the setup heading into this quarter is unusual.
All six of Canada’s largest banks report over just two days. Three on Wednesday May 27 and three on Thursday May 28. And every single one of them is trading at or near an all-time high. That doesn’t happen often, and it makes this earnings season more important than most.
In this preview I’m going to cover what each bank has done well, what each has done poorly, what to expect from Q2, what could send each stock up or down, and the specific things I’m watching when the reports come out. At the end I’ll give you my ranking from best to worst heading into the quarter.
These are the most popular stocks in Canada by ownership, so let’s get into it.
The Sector Setup Heading Into Q2 2026
A few things you need to know before going bank-by-bank.
Big Six earnings are expected to grow in the double digits. The catch is the comparison is easy. Q2 2025 was when the banks built up massive tariff reserves to protect against an economic hit from Trump’s trade policies. Those reserves depressed earnings last year, and most of them ended up being too conservative. So a 17 to 19% earnings growth print this quarter is mostly easy math doing the work. The market knows this. Don’t expect every bank to rip just because the headline number is big.
All six banks beat expectations in Q1. That sets a crazy high bar for Q2. The banks need to execute. They’ve ripped in price over the last few years and the room for disappointment is real.
Valuations are stretched. The sector trades at around 13.7x earnings versus a 10-year average of 11.2x. These banks are priced for perfection. A lot of them have been delivering perfection, but the bar is high. If we see elevated provisions, weak capital markets, or slowing earnings growth, the multiple comes down fast.
Capital markets are expected to grow 13% year-over-year. This is a major swing factor, but it’s a slowing of growth. The markets have ripped for a couple years and the tough year-over-year comparables are catching up. Trading desks need to keep matching record activity.
Canadian unemployment is at a six-month high. That’s a concerning backdrop while banks are posting double-digit earnings growth.
The mortgage renewal cliff peaked in 2025 and is supposed to ease in the second half of 2026. If we see provisions normalize, that’s a positive signal for the cycle.
The CUSMA trade review is in June. If that goes sour, we get higher unemployment, slower GDP growth, and pressure on the banks. We won’t know the outcome this quarter, but the overhang is real heading into the second half of the year.
Now let’s go through each bank.
Royal Bank of Canada (RY): The King of Canadian Banks
Royal Bank is the barometer for every other Canadian bank. The benchmark is set so high by this company that a lot of investors don’t bother looking past it.
What RBC has done well
The HSBC Canada acquisition was the biggest move in Canadian banking in decades. The integration is already coming in well ahead of Royal Bank’s targets, and if it continues, it’ll keep vaulting earnings.
Wealth management has been an absolute monster. Q1 earnings in that segment grew 32% year-over-year. This is one of the separating factors for Royal Bank. No other Big Six bank has wealth management of this quality at this scale.
There’s also a City National Bank turnaround happening in the United States. This US subsidiary struggled for years. Management got overhauled, new people got put in place, and we’re starting to see amplified results. If it continues into this quarter, it’s another tailwind for earnings.
What RBC has done poorly
Honestly, not much. The dividend yield is low at 2.6%, but that’s because the stock has run up so much in price, not because dividend growth has slowed.
People will look at other Canadian banks like CIBC or TD and notice they’ve outperformed Royal Bank recently. But you have to remember the low base those banks were working from. Royal Bank just executes at almost all fronts. It hasn’t had the drawdowns other banks have had, so it hasn’t had as much room to bounce.
What to expect this quarter
Royal had high single-digit earnings growth last quarter. I’d expect them to push into double-digit growth in Q2. If they don’t, the market will likely send the company downwards because it’s trading at a meaningful premium to historical averages. This company needs to execute.
What would send the stock up
Lower provisions for credit losses, particularly in Canada, particularly Canadian mortgages. Royal Bank’s Canadian growth is slowing a bit, so the way they amplify earnings is by lowering provisions. If the housing situation in the GTA or Greater Vancouver settles down, provisions come down and earnings beat expectations.
Amplified HSBC integration benefits would also push the stock up. If management mentions synergies are coming in even faster than the current pace, that’s a positive surprise.
Wealth management has a tough Q1 to compare to. But if it grows at the pace it’s been running, the slowdown in Canadian loan growth will be offset by capital markets and wealth management strength.
What would send the stock down
Royal Bank has heavy exposure to GTA and Greater Vancouver real estate. If we see a mortgage crunch, high levels of unemployment, or tariff impact hitting those regions, provisions will escalate. The market doesn’t want to see rising provisions at sky-high valuations. A reading like that would probably trigger a correction, and by big with Canadian banks I mean a mid-5% range move. Not catastrophic, but meaningful.
The reverse of the bull case also matters. If capital markets slow, or the HSBC trajectory slips, expect volatility.
Key things to watch
Watch provisions for credit losses. Watch wealth management. And pay particular attention to the company’s commentary on mortgage delinquencies and the overall health of the Canadian consumer in the major real estate markets.
TD Bank (TD): The Redemption Arc Continues
TD has been one of the biggest redemption arcs in Canadian banking. The stock is up roughly 75% from its anti-money laundering lows. It’s also the cheapest bank in the Big Six on an earnings basis, primarily because of the US asset cap that’s going to limit how fast it can grow.
But you’re getting better valuations relative to the growth, and that’s the trade.
What TD has done well
TD has cleaned up the AML mess decisively. They paid billions in fines, but they’re spending the money to remediate the issues, which will ultimately get the asset cap off them faster.
They sold most of their Charles Schwab stake, roughly $15 billion, and used the proceeds to buy back shares at depressed valuations. Management essentially decided there was more money to be made buying back their own stock at low prices than holding Schwab. They’ve made a lot of money on those repurchased shares since.
The Canadian side has carried the company. Deposits are strong, loans are strong, return on equity is increasing. If TD gets all of this going at once, particularly with a removal of the asset cap, it could be one of the better opportunities in the sector. I’m not buying it today, but once the cap gets closer to removal, the market should react positively.
TD also has a huge capital position. The CET1 ratio sits at 14.5%, which will let them keep buying back shares. They’re still the cheapest Canadian bank by a wide margin, so continued buybacks amplify the earnings per share story.
What TD has done poorly
The AML issue was catastrophic. As a result, TD has had to actually decrease its US-based business by around 10%. The asset cap forces them to sell assets or trim loans whenever they get close to the limit, which limits growth.
Most analysts don’t believe the asset cap will be lifted in 2027. They’re looking more toward 2028. Wells Fargo’s asset cap took seven-plus years to come off, and US regulators aren’t likely to be in a rush to remove restrictions from a Canadian institution.
What would send the stock up
Any positive commentary on the AML situation, the asset cap, or reduced AML remediation spending. Right now the spending is dragging on GAAP earnings. The company is still paying a lot of money to put compliance practices in place. If that spending starts coming down, you get an improvement in earnings that the market will absolutely love from the cheapest bank in the sector.
The other catalyst is continued US earnings growth despite the cap. If TD can keep growing US earnings even with the restrictions, you end up with a business that’ll fire on all cylinders the moment the cap is lifted.
What would send the stock down
It all boils down to the AML situation. Heightened remediation costs, any sign that regulators aren’t going to lift the cap, or any signs the US banking business is starting to suffer from the cap. We haven’t seen that yet, but it could come. Everything else about TD is pretty good.
Key things to watch
Watch the PCL ratio (provisions for credit losses) and watch net interest margins in the United States. They expanded last quarter. If they keep expanding despite the asset cap, that’s a very positive sign.
Scotiabank (BNS): The Perpetual Turnaround
I like to call Scotiabank the bank that has been in turnaround mode for the better part of seven or eight years and never quite seems to turn things around. It’s done well lately, but every Canadian bank has done well lately. Scotiabank has done the least well of all of them.
What Scotiabank has done well
They’re getting out of Latin America. That was a disaster for the company. They’re exiting all those spaces and focusing more on the North American corridor of Canada, the US, and Mexico. The Latin America bet could’ve worked, but it just didn’t, and getting out of it is the right call.
In the US they now have KeyCorp, and their Mexico segment is doing very well. If they can divert their efforts to these areas, I could see them doing fairly well over the next 5 to 10 years. Am I confident enough to buy the stock right now? Not really. I owned it for a while and moved on because I was tired of waiting. Let’s see if they actually execute, and maybe I’ll take another look.
What to expect this quarter
A bit cleaner results after the Latin America divestitures. KeyCorp is doing well in the US, so if that continues, the stock should do well. The Mexico segment despite relatively weak GDP growth is driving a lot of the results right now.
Scotiabank has one of the weakest credit loss profiles in the Big Six, and they’re expecting improvements in the second half of the year. If they get improvements ahead of schedule, the market will react positively.
What would send the stock up
Continued growth in Mexico. Earlier-than-expected improvement in provisions. And continued return on equity expansion. Scotiabank has the weakest ROE of any Big Six bank, and a lot of that is because they weren’t great at using shareholder equity to drive results in Latin America. They’re transitioning that strategy now, and if they can keep the ROE climbing, the market will reward them.
What would send the stock down
If Mexico weakens, the stock falls. If capital markets continue to be weak (Scotiabank was one of the rare banks that posted a weak capital markets quarter in Q1), that hurts them too. Capital markets is a major profit driver across the sector right now, and Scotiabank can’t afford to be the outlier.
Key things to watch
Watch the Mexico segment. Watch provisions. And watch the net interest margin in that North American corridor. If we see improvements on all those fronts, Scotiabank has a real chance of ending the quarter green.
BMO: The US Recovery Story
BMO was another disaster of 2024 and 2025. That was when their provisions for credit losses went through the roof. This is very much a US play in terms of growth. Unlike CIBC or Royal Bank with their heavy Canadian exposure, BMO is leaning heavily on the US. That drove a lot of growth, but it also caused most of the problems in 2024 and 2025 on the US commercial side.
What BMO has done well
They’re rolling out a massive expansion in California with 130-plus new branches, the biggest US expansion in BMO’s history.
Management has also guided to a 15% return on equity by 2027. That wouldn’t get them back to the level of National Bank or Royal Bank, but it’s a clear step in the right direction. The trajectory upward is a positive sign.
What BMO has done poorly
The US commercial loans hammered them in 2024 and 2025. The CEO actually had to take a pay cut because of how badly that segment performed.
BMO also has a ton of US commercial real estate exposure, which has not performed well. The office space situation across North America is just difficult right now. It’s hard to see a clear bull case there, but the good news is most of the damage from those provisions is already soaked into the stock.
What would send the stock up
Management has said US commercial real estate growth is expected to turn positive over the next year. If they can get there sooner, the market reacts positively. That would be earlier than expected, and it would also flip the segment that’s been dragging on BMO’s results back into a tailwind.
BMO is doing a lot of things right. If they can fix the main area they’ve been doing wrong, the market will reward them. They’re at TD-level valuations, slightly more expensive but still cheap with reasonable upside if they execute.
What would send the stock down
If the US commercial situation is not resolved. If they continue to see softness after kind of leveling off, the market gets fears we’re heading toward another 2024-2025 situation, and the stock pulls back. And if they show no progress toward the 15% ROE target, the stock dips on weak execution.
Key things to watch
Pay attention to the US commercial growth recovery. Pay attention to the California expansion. And pay attention to overall US growth, because that’s the area BMO really needs to deliver.
CIBC (CM): The Bank I Was Most Wrong On
I’ll be honest. CIBC is the bank I was most wrong on. I didn’t like them because I thought they were the riskiest of the Big Six, primarily because of their exposure to Canadian residential real estate.
You have to hand it to former CEO Victor Dodig, who has since moved to Telus as their CEO. He turned this company around and it’s now showing up in the results.
What CIBC has done well
Going back in history, they landed the Costco credit card portfolio, which brought in millions of new clients. They acquired PrivateBancorp, which gave them their US platform. And they flipped their return on equity to be the highest in the Big Six, beating premier names like National Bank and Royal Bank.
Capital markets are soaring for CIBC. And the mortgage book, the historic #1 fear, is doing better than anyone could have predicted.
What CIBC has done poorly
Recently, next to nothing. If you go back about a decade, the issue was simply too much residential real estate exposure, which got the stock rated downward by the market as the riskiest option in the sector. But that risk didn’t materialize.
They had a ton of provisions early in COVID where the bear case looked like it was finally coming true. Then they flipped the script and saw a severe reduction in provisions as the situation turned out to be nowhere near as bad as feared.
What would send the stock up
A deceleration in provisions. CIBC still has the most exposure to Canadian real estate of any of the banks, so confirmation that this isn’t an issue would be continued provision declines from where we are now.
Capital markets posting another blowout quarter like last time would also drive the stock. And if CIBC raises its ROE targets, which is very possible because they’re coming in well ahead of expectations, the market will love that. Despite doing so well, CIBC is still not trading at the levels of National Bank or Royal Bank on valuation.
What would send the stock down
Pressure in the mortgage market. That’s the obvious one. It would confirm the long-term bear case on CIBC’s mortgage exposure. The mortgage renewal cliff is decreasing right now, but it’s not eliminated. Any pressure on that Canadian mortgage portfolio would not be received well.
There’s also a new CEO in place named Harry Culham. We don’t know yet what his commentary tone will be. Victor Dodig was always bullish on CIBC. If Culham takes a more cautious tone, the market may not like it.
Key things to watch
Pay attention to the mortgage commentary. Pay particular attention to capital markets. And watch the company’s overall tone with the new CEO and what he plans to do strategically.
National Bank (NA): Last But Probably Best
National Bank has been the best performer in the Canadian banking sector for the last five, ten, and fifteen years. It’s been crazy how well this company has performed. Despite not being a Quebec pure-play anymore, it’s the biggest Canadian pure-play you’re going to get. And with the Canadian Western Bank acquisition, they’ve actually expanded beyond Quebec into the rest of the country.
What National Bank has done well
The Canadian Western acquisition was a genius move. It came with a lot of integration opportunity. They can now offer a multitude of products to relatively limited customers in Western Canada who had exposure to real-economy industries like oil and gas, forestry, and similar sectors. Those customers now have access to products they couldn’t get before.
The Canadian Western integration is well ahead of schedule. I actually think they sandbagged guidance when they bought the company because it’s coming in so far ahead. The market loved it. People initially thought National overpaid, but now they’re starting to see the synergies. They did not overpay. They probably got Canadian Western on the cheap.
What National Bank has done poorly
Very little. If I had to pick something, the Quebec-based exposure and the fact they didn’t expand earlier outside of Quebec is one of the main weaknesses. They could’ve grown faster earlier.
The difficulty there is there were really no acquisition targets in Canada. Canadian Western was one. Laurentian was pieced apart not too long ago. There weren’t a lot of moves to be made, and National Bank made the best one in the country. That’s a big comment considering how well Royal Bank has done with HSBC.
What would send the stock up
Continued acceleration in Canadian Western integration synergies. This will be one of the first clean quarters that won’t have a bunch of adjusted results muddying the comparison. We’re going to get a clean view of any operational issues. I don’t expect much.
Loan growth in Canada ahead of most peers, which should be expected given the Canadian Western acquisition gave them so many tailwinds. We don’t want to see loan growth lag despite spending billions on that deal.
I’d also like to see them raise their return on equity targets, which I think will happen if the other things I mentioned play out.
What would send the stock down
The flip side. If Canadian Western has a tough quarter, the stock drops. Quebec has held up well compared to Ontario and British Columbia in this cycle. If we start to see weakness in Quebec, the stock dips because it’s expensive on a valuation basis.
Key things to watch
Pay attention to Canadian Western synergies and overall results. Pay attention to those return on equity numbers. And watch the personal and commercial segment to see if there’s improvement.
The Big Themes for the Quarter
A few questions to ask across all six banks:
Has PCL peaked? Is mortgage stress contained? If contained, bank stock prices keep heading upward.
Can capital markets keep up the blowout quarters? If the overall market keeps trending upward, retail investors keep coming in, and wealth management keeps growing, capital markets push bank share prices higher. A market correction does the opposite.
Net interest margin trajectory. Most banks expanded margins in Q1, and most banks had very strong price reactions because of it. Can it continue?
Are bank valuations stretched? I’d argue no, if they execute. If they don’t execute, there’s no doubt we’re stretched here and we’ll see a correction. Would a correction be welcomed? Absolutely, because it lets me buy these banks at cheaper valuations. I’ve actually trimmed bank positions at the end of last year because they had grown too large in my portfolio. The sector P/E is 25% above the 10-year average. These banks are priced for perfection. They need to execute.
Is the mortgage renewal cliff actually a fizzle? Most Canadian homeowners seem to be doing just fine. The difficulty is they do just fine until they don’t. We saw this a few years ago when provisions for credit losses looked healthy and then suddenly didn’t.
My Ranking from Best to Worst Heading Into Q2
This is just my speculation on who reports the best vs weakest quarters. Take it for what it’s worth.
1. Royal Bank (RY). Just the Premier Bank forever. I don’t expect that trend to slow.
2. CIBC (CM). They’ve been doing so well lately and there’s no sign of the Canadian consumer slowing.
3. National Bank (NA). The Canadian Western acquisition combined with Canadian consumer strength should drive a very solid quarter.
4. BMO. The US environment is picking up. They’re due for some positive action from their US assets.
5. TD Bank. Asset cap is still an issue, but they’re growing despite the limit. If we see continued growth, the market will start pouring in once it knows the cap is coming off.
6. Scotiabank (BNS). I just don’t have a lot of confidence right now. They’re going through a revamp, selling off Latin American assets, leaning into the North American corridor. Could be one of the better performers long-term, but I don’t think we see the transition right away.
Bottom Line
The Big Six banks are going to move largely in unison this quarter because they all have so much exposure to the Canadian economy. That’s unavoidable. So if we see weakness from one bank, we’ll likely see weakness across the group. Either we get a green quarter or a red quarter across the board, unless one bank really blows out unique results. BMO could be the exception if its US portion performs exceptionally well, given they have less Canadian exposure than peers.
Going in, valuations are stretched, the bar is high, and the room for disappointment is real. But the underlying setup is favourable, with easy comparables, expanding margins, and normalizing credit. If the banks execute, this quarter confirms why these stocks have ripped over the past year.
Either way, the next two days will tell us a lot about where the Canadian financial sector is headed for the rest of 2026.
